Herding traders into a trap

Price setup prior to ECB event placed traders in a fix to choose a counter-trend breakout play versus a fade-trade that is with-the-trend continuation. As we can see from this chart, point 1 marks the spot where bulls are shown a breakout play but which turns out in the aftermath to be a sell signal. Perfect bull trap.

USDSGD chart from 06 June 2014 – day following ECB Bid Rate and Press Conference

Same drama happened with USDSGD this week

USDSGD bull trap closes after FOMC last night

Fact #1 – Red shows the month to month trend which is down. This is a very significant time frame.

Fact #2 – Purple shows that week to week trend is also aligned with lower low following ECB event. The right trade must follow the down trend.

Fact #3 – Price makes a breakout on Tuesday to reverse sharply following FOMC and revealing a false break and bull trap.

Pre- and post-FOMC looks just like ECB setup; same plot

We analysed 2 days ago here that two major time frames for USDSGD are aligned so that the right trade must be a continuation of the down trend. Then I made a prediction that:

In the name of FOMC meeting tomorrow, once again the market serves a high impact news that will force traders to choose between trading a breakout versus fading one.

This was the chart I used then

Following last night’s FOMC and observing today’s price action, the plot turned out to be the same.

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